San Mateo County sues Lehamn Bros.

November 13, 2008 2:03:36 PM PST

San Mateo County has filed a lawsuit against executives of the Lehman Bros. investment firm, which went bankrupt in September and lost more than $150 million of county taxpayers' money, county spokesman Marshall Wilson said.

The suit was filed today in San Francisco Superior Court.

A number of San Mateo County entities contribute to a County Investment Pool, and 5.9 percent of that account was invested in Lehman Bros. securities, County Treasurer Lee Buffington said.

Contributing entities include school districts, cities, the San Mateo County Transportation Authority, the Peninsula Corridor Joint Powers Board, the Bay Area Air Quality Management District and fire districts.

On Sept. 14, Lehman Bros. announced it was filing for bankruptcy and the participants in the County Investment Pool lost a collective $155 million, Buffington said.

The San Mateo County Board of Supervisors authorized the lawsuit in a closed session on Oct. 28. It was filed today against individuals on the Lehman Bros. board of directors, including CEO Richard Fuld, Jr.

The lawsuit alleges the executives misled investors to believe the institution was stable, while privately aware that the company was on the verge of collapsing.

The benefit of suing the officers and directors is that their individual actions may be covered by the company's errors and omissions insurance, said Supervisor Mark Church, chair of the county Finance and Operations Committee.

The county retained counsel from Burlingame law firm Cotchett, Pitre & McCarthy to file the suit, Wilson said.

In addition to filing the lawsuit, the county has also hired a bankruptcy attorney in New York to represent its interests in bankruptcy proceedings with Lehman Bros., an effort that could recoup 20 to 60 percent of the county's $155 million loss, Buffington said.

County officials have also been working with local congressional leaders in an attempt to recover the money by way of the $700 billion Wall Street bailout, according to Buffington.